The island was settled by the Norse seafarers in the ninth century; they established the world’s first known republic and parliament in about AD 930. The original seat of this democratic system may be found at Þingvellir, about an hour’s drive from Reykjavík, where the original Viking settlers used a natural amphitheater, formed by a cliff wall, as an assembly. In the mid-13th century the islanders submitted to the authority of the King of Norway, and when Norway came under the control of Denmark in 1380, Iceland did too. In 1814, Norway became independent, but Iceland
remained a Danish territory. In 1840 it was granted its own constitution – effectively allowing internal self-government.
Full independence was granted in 1918, although Iceland continued to recognize the Danish monarch as head of state. It was not until 1944 that Iceland became a fully independent nation with its own head of state. Contemporary Icelandic politics display the customary Western European spectrum of political parties, although a notable feature has been the influence of women within the main parties (Independents, Progressives and Social Democrats). Iceland’s most famous political figure of recent times is also a woman, Vigdis Finnbogadottir, who served four consecutive terms as President between 1980 and her resignation in 1996. She was replaced by Olafur Grimsson, who began a second term as President in 2001. The Parliament (
Alþing) has generally been dominated by coalition governments. These were of a broadly center-right persuasion until the mid-1970s, since when the left has dominated.
At the general election in April 1991, the Independence Party (IP) emerged as the largest grouping in the
Alþing and formed a coalition administration with the smaller SDP. The ex-mayor of Reykjavík, David Oddsson, who had successfully taken over the leadership of the IP, was made Prime Minister. Oddsson was re-elected at the 1995 general election, but a decline in support for the IP later forced him to form a coalition administration with the Progressive Party (PP). At the most recent poll in May 1999, the same coalition – still under Oddsson – retained overall control of the
Alþing.
Icelandic foreign policy is dominated by two factors: fishing and relations with Atlantic powers. Iceland is a member of NATO, the Nordic Council and of the Council of Europe. Ties with NATO have been loosening since before the end of the Cold War – in May 1985, the
Alþing declared Iceland a ‘nuclear-free zone’ – and this process has accelerated since the reduction of the large NATO base at Keflavik. Iceland has historically eschewed membership of the European Union but, since Sweden, Finland and Denmark have joined up, it is Iceland’s opposition to the EU’s fisheries policy of stock management by quotas that is now the decisive influence. Both main parties strongly oppose the Common Fisheries Policy, so it seems unlikely that Iceland will apply for EU membership in the foreseeable future.
On the issue of whaling, Iceland has been among the few objecting to the International Whaling Commission’s (IWC) ban: in 1992, the Government withdrew from the IWC. In 2001, it applied to rejoin but, having declared its intention to resume commercial whaling, was only granted observer status.
GovernmentExecutive power is vested in the President and Government, while legislative authority rests jointly with the President and the 63-member
Alþing (Parliament). Both are elected for 4-year terms. The Alþing has recently been reduced from two houses to one.
EconomyIceland made headlines around the world in October 2008 as the country found itself on the verge of economic collapse. Icelandic banks, which had lent hundreds of billions of pounds overseas, were hit hard by the global recession, and the Icelandic government had to step in and seize control of the country's biggest banks in a rescue operation that sent shockwaves around the island and beyond.
It's uncertain at this stage what the future holds for this small country. Until recently Icelanders enjoyed a per capita income that was amongst the highest in the world at US$38,000 (2007)/US$39,400 (2008 estimate). The country had been in a positive economic period; in 2007 economic growth was at 2.5% and unemployment at a very low 1%.
Iceland is short of raw materials and so relies heavily on foreign trade; exports of goods and services account for more than one-third of GNP. The largest proportion of these derives from fishing, Iceland's most important export (70% of its export earnings). The economy is therefore particularly susceptible to fluctuating fish prices and maintains a broad fisheries exclusion zone (320km/200 miles) to protect its earnings. The government remains opposed to EU membership, primarily because of concern about losing control over their fishing resources.
Aluminium smelters are playing an increasingly big part in Iceland's economy, and have polarized Icelanders in recent years. While some argue that the pristine nature of the interior should be preserved at all costs, others think it should be tapped to regenerate areas where traditional industries are no longer viable.
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